Family trust elections and family trust distribution tax are rapidly becoming one of the biggest emerging risk areas in private group taxation.

The government has been urged to take action to address issues with the family trust distribution tax provisions in Schedule 2F of the Income Tax Assessment Act 1936, with CA ANZ, CPA Australia, the Institute of Public Accountants, the National Tax & Accountants’ Association and The Tax Institute warning that family groups are facing "deeply concerning" unexpected and disproportionate tax liabilities.

In our new two-part guide to family trust elections and family trust distribution tax, Andrew Henshaw is joined by Ani Tuna to explain what these rules are, why they exist, and why they are now causing significant problems for taxpayers and advisers.

For many advisers and private groups, this is an area that historically received limited attention. That is changing quickly. If your group has historic trust structures, family trust elections or interposed entity elections in place, now is the time to review them before the ATO does. Contact our tax team here.

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Part 1 covers:

• what family trust elections are;

• why they were introduced;

• how the family group rules operate, and;

• retrospective elections and identifying historic elections.

Part 2 turns to family trust distribution tax, including:

• how FTDT is triggered;

• the Thomas family case and the reported $13 million liability;

• why historic trust arrangements are under ATO scrutiny;

• the potentially severe liabilities that can arise from genuine mistakes, and;

• practical issues now emerging in ATO reviews and disputes.